HC Deb 17 November 1972 vol 846 cc840-7

2.23 p.m.

The Under-Secretary of State for Trade and Industry (Mr. Cranky Onslow)

I beg to move, That the Import Duties (Developing Countries) Order 1972 (S.I., 1972, No. 1620), a copy of which was laid before this House on 2nd November, be approved. The order reimposes for the rest of the year the duty of 16 per cent. on certain leathers being imported from Argentina, Brazil, Colombia and Uruguay. Imports from the Commonwealth, the European Free Trade Area the Irish Republic and developing countries other than the four named will continue to be free of duty.

The bulk of imports affected by the order can be conveniently described as bovine chrome upper leather. The main use for this leather is in the manufacture of shoes. In 1971 the United Kingdom tariff on this leather was 16 per cent. on all imports other than those from Commonwealth, Irish Republic and EFTA suppliers. However, as the House will recall, we introduced an order towards the end of last year which granted preferential treatment for the whole of 1972 over a wide range of industrial products being imported from developing countries, including Argentina, Brazil, Colombia and Uruguay. The order brought into effect the United Kingdom contribution to the generalised system of preferences—the GSP—agreed upon at the United Nations Conference on Trade and Development.

When we agreed to the GSP scheme we made it clear to the beneficiaries and to other donors that we reserved the right to modify or withdraw the preferential tariff treatment from any product that was being imported into the United Kingdom, as a result of the preference, in such quantities or under such conditions as to cause or threaten serious injury to United Kingdom producers of like or directly competitive products.

The British Leather Federation applied earlier this year, on behalf of its members, for the reintroduction of duties on a wide variety of leathers from a number of exporting countries. The Government gave very careful consideration to the application and concluded that in the very narrow range of leather from the limited number of countries concerned there was adequate evidence to justify reimposing the duty.

Imports of these leathers had increased substantially during 1972, until it was clear that if no action was taken the imports would gain about a quarter of the United Kingdom market in 1972. This compared with only 8 per cent. of the market in 1971. It was clear that a continuation of this situation would threaten the continued existence of a number of small tanners and put in jeopardy the employment provided by them.

It is for this reason that I consider it reasonable to grant to the United Kingdom producers the renewal of the tariff protection, over this narrow range of goods, which they enjoyed prior to the beginning of this year. I therefore commend the order to the House.

2.27p.m.

Mrs. Judith Hart (Lanark)

I shall not detain the House long. Leather does not normally generate tremendous passion in the Chamber, but I have some questions and comments.

The first comment is a very general one, arising from the order. As the Minister has rightly said, a year ago we approved the British generalised preference scheme, and this is the first departure from it. On the general issue of import duties the Opposition are very anxious that in the negotiations which are taking place—and will continue over the next few months—about the harmonisation of our generalised preference scheme with that of the European Economic Community, the Government should be as tough as they possibly can. We think that they have a very good basis for toughness, because it is evident that our scheme is very much better. It is equally evident—I am sure that the hon. Gentleman will have seen correspondence that I have had with the former Chancellor of the Duchy on this matter—that there are many elements within the EEC, particularly the Socialist Parties in the EEC, who agree with us that our scheme should dominate the EEC scheme, rather than the other way round. So, in so far as the hon. Gentleman has responsibility for these matters over the next few months I hope that he will lend all his energies to taking a more realistic but, at the same time, a very tough line in the negotiations that take place.

On the subject of leather I have, first, a question on procedure. As one understands it from the past, normally the Department of Trade and Industry practice on anti-dumping measures has been to advertise and to consult. On this order there has been a departure from that general practice, and I wonder why. As this is the first occasion when an exception has been made under these generalised preferences, one would not like to think that a much worse precedent was being established than under the old anti-dumping measures. I hope that it will be the intention to consult more fully in the future and to advertise and give time for consideration of these matters.

My second point relates to substance. There are some rather extraordinary features concerning the order. It takes place against a background of a British tanning industry with some 14,000 workers, and a time when the price of leather in the world market is at a post-war peak. The prices are now higher than they were in the post-war period, even 1951.

There is also a background of a shortage of raw hides for British tanners. The Minister may be able to confirm that I am right in saying that 30 per cent. of United Kingdom hide production is being exported, that this represents a 20 per cent. increase in value over last year and that there has been such concern about the supply situation that the British Leather Federation asked the DTI whether it would impose export quotas, but the DTI refused. So there is a very odd supply and price background here.

There is no doubt that one factor in the supply situation is that some foreign countries, particularly those in Latin America—Brazil is a very clear example—are processing much more of their output, and that is affecting supplies. But as to the proportion of the increase in imports represented by those countries covered by this order, we need to get this carefully into perspective.

Imports from all OECD countries over the last year have risen by 18 per cent.—from £17 million to just over £20 million. As the Minister said, the proportion from the Latin-American countries in the order has risen much more sharply, by about 115 per cent., but they represent only a tiny proportion of total imports—only just over £3 million, compared with the £17–£20 million from all OECD countries. So there is some incongruity, at this time of short supplies, in selecting these four countries for this rather specific restriction.

I have one detailed point. It may be that the Minister cannot answer this one immediately, and if not, perhaps he can let me know the answer later.

One gathers that chrome crust, whose meaningfulness technologically escapes me, is included in the order, although the British Leather Federation asks only for restoration of duty on finished leathers. One consequence has been brought to my attention. Firms dealing with chrome crust leather, with orders placed some time ago in Latin America for partially-treated hides to be finished here, now find that large quantities of semi-finished leathers in transit to British tanneries are caught by this order. This will mean that industrialists here will have to pay much more than the contracted price, because of the imposition of a tariff, without any opportunity to make adjustments, because of the suddenness with which the order has been brought in. What are they to do?

I wonder whether there is any possibility of goods of this kind in transit being excluded from the order, or whether the hon. Gentleman can think again and make sure that only finished leathers are included in the order.

That raises another point—the general question where the tanners are to stand under the Government's price freeze. It is clear that the DTI considers that leather prices come under Article 5 of the White Paper. This imposition of import duties is bound to result in an increase in price, or in a considerable difficulty being caused for the industry in this country. Where will the industry stand in this respect?

All in all, it is a rather odd situation. Here we have the DTI taking a tiny corner of this problem of the supplies of hides, selecting developing countries in Latin America for tariff discrimination without having consulted or given a full opportunity for discussion, going further than it was originally asked to do by the British Leather Federation and effectively raising the price of hide imports from these four countries at a time of shortage of supplies and peak hide prices, just when the Government have announced a price freeze. This is an extraordinary way in which to make the first departure from the British generalised preference scheme, and it leads one to wonder whether the right hand of the DTI knows what the left hand is doing.

This is only for two months, and I would welcome from the Minister a clear picture of how he reconciles the order with the price freeze which the Government, ineffectively as we think, propose to carry out. We shall observe with some concern the consequences of what seems to us to be a somewhat less than usually adequately considered order, brought in in a very hurried way.

2.36 p.m.

Mrs. Elaine Kellett-Bowman (Lancaster)

My hon. Friend spoke of the danger to small tanneries from cheap imports. I hope that he and his right hon. Friend will also remember the damage to British shoe firms and their employment prospects by the flood of cheap shoe imports well below the cost of the leather itself, and that similar action will be taken on that matter.

2.37 p.m.

Mr. Onslow

With leave of the House, I should like to try to answer the points which have been put. To take that of my hon. Friend the Member for Lancaster (Mrs. Kellett-Bowman) first, the Government are keeping an eye on this and discussions will be put in hand as soon as any threat is foreseen. If I can write to her and explain precisely how we see the present situation, I will do so.

The right hon. Member for Lanark (Mrs. Hart) complained that the right hand of the DTI did not know what the left hand was doing. I hope to be able to prove her wrong in that at least. When she said that this is the first departure from the generalised system of preferences, she is right, but she is wrong when she sees in our action on this occasion some dangerous precedent.

Perhaps the right hon. Lady remembers the debate on 8th December last year, when my right hon. Friend the Member for Argyll (Mr. Noble) explained how we intended to safeguard the situation of our domestic industry. He set this out very clearly when he said that it was necessary that imports under the new preferences should be established as likely to lead to real injury before we could invoke the powers which he forecast we could use. He said: The use of our safeguard would not be justified simply as the result of increased imports. Nor do we have any intention of taking no action until a great flood of imports has arrived and caused the injury. We can and will act if industry can show that serious injury is threatened as the result, for example, of a marked upward trend in the volume of imports or in the rate that orders are being switched. … I can assure the House that the arrangements will be both flexible and quick to deal with any threats that arise."—[OFFICIAL REPORT, 8th December, 1971; Vol. 827, c. 1463.] I think that the House understood at the time that this was a warning of how action would be taken which would be taken into account by those who dealt in the commodities affected and which they might feel they could safeguard themselves against by contractual arrangements of their own. But it was at least a sensible way of proceeding, because to wait for long consultations might cause a situation even worse than the one with which we were originally confronted and wished to correct.

The right hon. Lady is right: this is not an action which we particularly like to have to take nor a situation that we wanted to see arise. But she need not be too alarmed about this constituting a dangerous precedent.

As for consultation, if there are any traders who are concerned and who feel that a situation is developing in a way which could lead to action like this, perhaps the best thing that they can do is to make their anxieties known to the Department will in advance of the situation developing to a point where we feel that action should be taken.

As to the origin and source of leather on the world market, I find it difficult to give an authoritative comment at short notice. But so far as this affects the particular figures for the types of leather covered by the order, it is worth setting out the comparative statistics. During the first nine months of 1970 the quantity involved—not the value—in thousands of sq. ft. was 1,281; in 1971 it was 1,872; and in the first nine months of 1972 it was 6,457. The rate of increase has certainly been very dramatic and I hope the right hon. Lady does not feel that we have not a justification for acting.

On the matter of chrome crust, I know that one of the right hon. Lady's hon. Friends has been anxious on this score. He has been in touch with the Department and it has been arranged that an exchange of letters should take place to clarify the matter. I am advised that we were not asked by the British Leather Federation to exclude this type of leather from the order. No doubt, it would be best if the right hon. Lady were to agree to wait for this to be clarified in the promised letter.

On the question of the price freeze, I think the House accepts—and I hope the right hon. Lady does—that in this instance we have a duty to protect our industry against serious injury from increased imports. If we had failed to act, we would have put jobs at risk. Leather and shoe manufacturers who wished to put up their prices must make their case. The cost of imported raw material is only one element to be considered. Price increases would be authorised only where they represented a high proportion of the total costs. If there is something to be clarified here, I expect that the Department can provide amplification.

Finally, on the situation as it is likely to develop, perhaps the best thing I can say is that during the coming year we shall retain control under our own generalised system of preference arrangements. From the beginning of 1974 our scheme will be aligned with that of the EEC under which duty-free imports of certain sensitive products, including leathers, from the beneficiary countries are limited to specified quotas. I notice what the right hon. Lady said about the pace-setting attitude of this country in trying to liberalise and advance the position of the developing countries. She need not fear that in this respect we shall slacken in our efforts to bring European standards up to those which we apply.

Question put and agreed to.

Resolved, That the Import Duties (Developing Countries) Order 1972 (S.I., 1972, No. 1620), a copy of which was laid before this House on 2nd November, be approved.